Capital goods production shifts the PPC outward for long-run growth

Steps:

• Identify the PPC as showing trade-offs between capital and consumer goods production.
• Recognize that points on the curve represent efficient production; inside points are inefficient.
• Note that capital goods investment increases future productive capacity, shifting the PPC outward.
• Select the point maximizing capital goods output for highest growth potential.

Why B is correct:

• Point B prioritizes capital goods, which, per the law of increasing opportunity cost, builds infrastructure and technology for sustained PPC expansion and long-run growth.

Why the others are wrong:

• A: Inside the curve, indicating inefficient resource use with no growth potential.
• C: Balances goods but favors consumer goods, limiting capital accumulation for future growth.
• D: Maximizes consumer goods, sacrificing capital investment and hindering long-run expansion.

Final answer: B